If you are self-employed or run your own business, you are liable for submitting tax returns. Making sure you’re tax complaint is essential as the fines for not doing so could be hefty.
A recent global analysis undertaken by PwC concluded that the UK has the second most effective tax system of the G20 countries. Whilst this sounds like good news, when compared with all countries, we’re a lot further down the list at number 23. Researchers concluded that Qatar has the simplest system which required a medium-sized company to spend only four hours on completing their tax return. In the UK, the average is 110 hours!
HMRC tax compliance
If HMRC is unsure you have submitted your return correctly, they will do a compliance check to make sure you are paying the right amount of tax. It could just be someone calling you to double check a figure if they think there’s been a simple error, or to undertake a more thorough check on your return, or even a major investigation.
According to the HMRC website, if they intend to do a compliance check, you or your accountant will be contacted and asked to make certain information available for checking. This could be your accounts, tax calculations, your personal or business tax return, or PAYE records. Once they have been checked, you will receive notification and will be either asked to pay any additional tax due within 30 days, or if it turns out that you have paid too much tax, you will receive a rebate.
There is a possibility that you may be asked to pay a penalty depending on the reason for the check and how helpful you’ve been.
Deadlines and period covered
The tax year runs from 6 April to 5 April the following year.
HMRC has two deadlines for filing your tax returns. If you are completing your tax return on paper (form SA100), you must return it by midnight on 31 October following the end of the tax year in point. If you are completing your return online, the deadline is midnight on 31 January following the tax year. If you are up to 3 months late, you will incur a penalty of £100 – and the longer you leave it, the greater the fines.
Any taxes owed must be paid by 31 January following the relevant tax year.
The advantages of using an accountant
By asking an accountant to complete your tax return, you will not only be saving yourself valuable time which could be better devoted to doing what you’re good at, i.e. running your business, but also less likely to need a compliance check because it will be completed accurately.
When choosing an accountancy firm to manage your tax services– look for one with a good reputation for high quality work, great customer service and long-term relationships with clients.